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<p>The decentralisation of policy functions to subnational governments needs not be uniform across jurisdictions and may instead be differentiated to reflect differences in administrative capacity, preferences, territorial characteristics and governance needs. This paper examines whether differentiated decentralisation arrangements are systematically associated with regional economic performance. Using harmonised data for middle-tier regions across OECD countries, we combine cross-sectional, within-region and event-time analyses. The results show that regions enjoying differentiated institutional status tend to exhibit higher income levels than standard jurisdictions, even after accounting for observable characteristics and time-invariant regional factors. However, the limited within-region variation available in the data provides no indication that changes in decentralisation status are systematically associated with improved economic performance, while descriptive event-time evidence based on the single observed institutional transition episode reveals no robust post-reform gains in economic outcomes. Taken together, the findings suggest that the stronger performance observed among differentiated regions is primarily associated with long-standing structural and institutional characteristics rather than differentiation itself. More broadly, the results indicate that differentiated decentralisation may serve objectives beyond economic performance, including territorial accommodation, governance responsiveness and the management of territorial diversity.</p>

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Parable of the Talents: Is differentiated decentralisation associated with stronger regional performance?

  • 期刊论文

  • 发表日期：

    2026年7月24日

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  • João Jalles,
  • Luiz de Mello

摘要

The decentralisation of policy functions to subnational governments needs not be uniform across jurisdictions and may instead be differentiated to reflect differences in administrative capacity, preferences, territorial characteristics and governance needs. This paper examines whether differentiated decentralisation arrangements are systematically associated with regional economic performance. Using harmonised data for middle-tier regions across OECD countries, we combine cross-sectional, within-region and event-time analyses. The results show that regions enjoying differentiated institutional status tend to exhibit higher income levels than standard jurisdictions, even after accounting for observable characteristics and time-invariant regional factors. However, the limited within-region variation available in the data provides no indication that changes in decentralisation status are systematically associated with improved economic performance, while descriptive event-time evidence based on the single observed institutional transition episode reveals no robust post-reform gains in economic outcomes. Taken together, the findings suggest that the stronger performance observed among differentiated regions is primarily associated with long-standing structural and institutional characteristics rather than differentiation itself. More broadly, the results indicate that differentiated decentralisation may serve objectives beyond economic performance, including territorial accommodation, governance responsiveness and the management of territorial diversity.